Kingfisher, Vijay Mallya propose to repay Rs 4000 crore to banks

New Delhi: Liquor baron Vijay Mallya and Kingfisher Airlines Ltd on Wednesday submitted in a sealed cover a proposal for repayment of Rs 4000 crore out of the loan amount of Rs 6903 crore to the consortium of banks led by State Bank of India by September this year.

Vijay Mallya

Along with Mallya and Kingfisher, the proposal was also submitted by United Breweries (Holdings) Ltd and Kingfisher Finvest (India) Ltd. A bench comprising Justices Kurian Joseph and R F Nariman allowed the consortium of banks a week's time to respond to the proposal and posted the matter for further hearing on April 7.

At the outset, senior advocate C S Vaidyanathan, appearing for Kingfisher and Mallya, submitted that they have given a proposal to the consortium of banks as to what can be done under the given circumstances. He said the copy of the proposal was given on Wednesday to the consortium of banks.

The senior advocate appearing for the consortium of banks said he would like to go through the proposal and then respond.

Vaidyanathan requested the bench that the proposal should be kept in a sealed cover for the time being, as negotiations were going on for the settlement and media hype could vitiate the atmosphere.

He said the proposal has been prepared after having discussions with the parties through video conferencing. On March 9, the government had informed the apex court that Mallya, who is facing legal proceedings for allegedly defaulting loans of over Rs 9,000 crores from various banks, has left the country a few days back.

The bench had then issued notice to Mallya and sought his response within two weeks on pleas filed by the consortium of banks seeking direction for freezing his passport and his presence before the apex court.

The bench had allowed the plea of Attorney General that the notice to him can be served through his official Rajya Sabha email ID, the Indian High Commission at London, through counsel representing him before various high courts, Debt Recovery Tribunal and also through his company. The AG had said that an amount of over Rs 9,000 crore was due to various banks and, on one pretext or the other, Mallya avoided to settle them.

Attorney General Mukul Rohatgi had said there was a need for a garnishee order (to attach money or property), as also for disclosure on behalf of Mallya. Rohatgi had said the banks were seeking an order that Mallya should appear in person before this court and sought a direction for freezing his passport.

The AG had said that Mallya had assets abroad which are far excessive to loans secured by him here. When the bench had asked how banks granted loan to Mallya under such circumstances, the AG had said loans were granted keeping in mind that Kingfisher Airlines had a fleet of aircraft as well as brand value. Loans were given also as the aircraft were attached to third parties.

The consortium of banks, in their appeal, assailed the March 4 order of Karnataka High Court refusing an 'ex-parte ad interim' order against Mallya, England-based Diageo Plc and United Spirits Limited.

The banks said the High Court should have passed interim order securing their financial interests, without hearing Mallya and others including debtor firm Kingfisher Airlines. Prior to moving the High Court, the banks had filed four pleas in Debt Recovery Tribunal (DRT) at Bengaluru seeking reliefs like freezing of Mallya's passport, arrest warrant against him and issuance of a "garnishee order against Diageo Plc and United Spirits Ltd from disbursing USD 75 million".

The banks had moved the DRT in the backdrop of Mallya's recent resignation from the chairmanship of United Spirits. Diageo Plc, the current owner of the liquor company, has agreed to pay USD 75 million (approx. Rs 515 crore) to Mallya as severance package.

Besides SBI, other banks which have moved the SC are Axis Bank Limited, Bank of Baroda, Corporation Bank, Federal Bank Limited, IDBI Bank Limited, Indian Overseas Bank, Jammu and Kashmir Bank Limited, Punjab and Sind Bank, Punjab National Bank, State Bank of Mysore, UCO Bank and United Bank of India. The banks have also sought a direction to Mallya to "furnish suitable security for his appearance before the DRT" during the pendency of banks' original applications for recovering debts.

The banks had also arraigned firms like Kingfisher Airlines Ltd, United Breweries (Holdings) Ltd, Kingfisher Finvest (India) Ltd, SBICAP Trustee Company Ltd as parties. The plea said the banks 'individually' had advanced loans to Kingfisher Airlines. By way of a Master Debts Recast Agreement (MDRA) executed on December 21, 2010, and related documents (Financing Documents), the existing loans were restructured and treated as a single facility.